Two of the commonest mistakes made by investors are paying too much for fast growing companies, or buying seemingly cheap companies unaware that they have poor growth prospects ahead of them.
If you missed the boat on fast growing companies, patience becomes a virtue, and it’s often worth waiting for the next boat, as chasing the original may leave you and your investments deep underwater! There are exceptions to this rule, but it’s worth remembering in general. Companies that offer the best mix of value and growth, will deliver the best returns for investors, here are a few currently being offered up.
Amalgamated Holdings Limited (ASX: AHD) is a business that is seeing rapid growth in its hotel and hospitality ventures. The super trendy QT hotels were the star performers, with profit among the 47 hotels the group owns or manages up 51.9% for the six months to December 2013. The group also owns the Rydges hotel chain and Thredbo Alpine Resort.
The mainstay of its businesses are the Event Cinema chains which it operates in Australia, New Zealand and Germany, they contributed more than half of normalised profit before tax for the six months to December 2013. Given the trends towards domestic leisure travel and international tourism supported by a lower dollar the hotel businesses look to have top growth potential.
Selling at $8.41 the group trades on a price-earnings of 16.4 based on analyst consensus forecasts. It also offers an attractive fully franked dividend yield of 4.9% and looks a strong buy any cheaper than today’s prices.
Leighton Holdings Limited (ASX: LEI) share price got the wobbles before Christmas amid allegations of corporate malpractice and boardroom battles. However the market seems to have moved on from what looks like relatively short-term issues, especially after the group in February reported a 30% rise in underlying net profit.
The construction giant appears to be building a solid future once again and trading on a price-earnings of 11.5 and partially franked dividend yield of 5.5% it looks to be offering good value.
Despite a significant run up in share price, Australia’s only investment bank, Macquarie Group Ltd (ASX: MQG), trades on a price-earnings of 15.8 and remains leveraged to improving global markets. Parts especially leveraged are its previously underperforming market-facing businesses of Macquarie Capital, Macquarie Securities and Fixed Income Currencies and Commodities.
It’s a highly-innovative business always adapting in search of further growth. As evidenced by its recent decision to divest its holdings in Sydney Airport Holdings Ltd (ASX: SYD) in order to allocate capital to potentially more profitable ventures. The business also suffered due to its exposure to the Great European Recession, however that seems to be slowly moving into the history books now and the return to growth in Europe would greatly benefit Macquarie. It trades on a dividend yield of 4.1% and looks a solid opportunity.
Amalgamated Holdings ticks the boxes as a value, growth and yield investment for my money. Importantly, as a leisure and entertainment business it’s also leveraged to one of the few areas of the domestic economy with an increasingly positive outlook.